Theranos: Another Venture Capital-Funded Startup Fraud Fairy Tale

Theranos: Another Venture Capital-Funded Startup Fraud Fairy Tale

UPDATED: October 12, 2016 Partner Fund Management Inconsistently Sues Theranos While Trying To Hedge Their Hedge Fund Bets to Recover From Fraud They Created. Below Original Story #TheSociopathicBusinessModel

Oh and look who stopped by to say hello:

UPDATED: October 5, 2016 Theranos Lays Off 340 Employees. Below Original Story

Updated: September 6, 2016

Venture capital-funded startup Theranos’ chief scientist commits suicide: Ian Gibbons was one of CEO Elizabeth Holmes’ first hires; which also means he was likely one of the first employees manipulated into thinking that innovation was above the law. False projections based on VC ROI (and not what the market can bear) to give the appearance of hypergrowth for an overvaluation is fraud better known as The Sociopathic Business Model™ and all too common in startups that put profit before employees, patients and even taxpayers. The truth does not need a narrative, only criminals do.

Theranos President & COO, Sunny Balwani “decides” to “retire.” That’s precious, pending a federal investigation, he “decided” to “retire.” Nope, CMS is gunning for Balwani and founder Elizabeth Holmes to prevent them from participating in CMS (Medicare/Medicaid) contracts for two years, similar to what happened to Synthes executives in 2011. Meaning no healthcare company would hire them interested in insurance reimbursement. That’s that equivalent to getting burned in the industry. It’s about time. Don’t let the door hit you on the way out Sunny!

Update: April 19, 2016

VC funded Theranos a subject of a criminal investigation, just like NEA funded startup Acclarent acquired by #JNJhttps://t.co/41xBCiAAgO

This site often writes about venture capital (VC)-funded startup fraud that costs employees their jobs, consumers and patients their safety or lives, and post-IPO or acquisition long-term shareholders & taxpayers billions while VCs make 8-10 times their initial investment back; and, this fraud cycle is encouraged, replicated and rewarded in the industry, better known as The Sociopathic Business Model™.

This week, Centers for Medicare & Medicaid Services (CMS), in an unprecedented move, proposed banning VC funded startup Theranos’s CEO Elizabeth Holmes and Theranos’s president Sunny Balwani for two years after learning that the company did not fix what regulators referred to as major problems within the laboratories. This is a great start! CMS prevented costly fraud and sent a very scary message to VCs.

Theranos was approved for one test yet was fraudulently offering 250 tests which means the sales projections (in part, how the company valuations are determined) were based on the company selling all 250 tests; and in turn eventually getting reimbursed by Medicare/Medicaid and then private health insurance. Reimbursement is what would make the startup attractive for an IPO or acquisition. Regardless if Holmes is removed from the company, the company won’t be able to support their $9 billion valuation because they can’t sell all 250 tests but only one test. CMS caught on to fraud before they & taxpayers paid for it, which is unique, thanks in part to what they learned from another venture capital-funded startup Acclarent which was sold to Johnson & Johnson’s Ethicon and not surprisingly underperforming post-acquisition due to healthcare fraud, and exposing that fraud is known as The MMpiHer Method™.

Not until venture capital firms are held accountable for funding startup fraud, from the healthcare industry to the tech industry, can we expect to see positive change. In the meantime, Theranos VCs potentially losing hundreds of millions might be what’s needed to get Silicon Valley to stop funding fraud and it’s certainly helping the rest of us take the billion dollar blinders off of companies like Theranos and (perhaps Uber) and see them for what they really are: fraud.

Nope, venture capital knowingly & willingly funds startup fraud and doesn’t get to hedge their hedge fund bets now that Theranos has been exposed as a fraud, thanks in part to another VC-funded startup case, Acclarent. Partner Fund Management isn’t a victim of Theranos they, along with all the other VCs, are responsible for funding the fraud in the first place. The ROI sales model was based on 250 tests even though Theranos was only FDA approved for one test. It’s false projections based on investor ROI (not what the market can bear) to give the appearance of hypergrowth for an overvaluation; and, that’s fraud! It’s nice to see the VCs stuck holding a worthless sack for once.

5 Comments

Shakamo Bradley Jalibani

THANK YOU! For this article and keeping Theranos and Holmes in the spotlight, despite their powerful PR and legal team trying to spin, baby, spin their lying, fraudulent, bullsXXt fantasy into a myth of success. I spent 18 months investigating Holmes, Balwani, and Theranos on behalf of potential investors/partners wanting to piss away good money into something too good to be true. The result of this investigation? The Emporer was not just naked, but was conning others and possibly costing lives. This investigation wasn’t just paper-checking and online tracking, it was record-check, dumpster diving, and travel all over the globe to verify Homes’ claims, background, and those of Balwani and others involved. What you have here is a spoiled child, Holmes, who was told that she was so special and destined to change the world that she believed it. She thought herself so special that she didn’t have to pay dues and do the real work that legit success requires. After all, she claimed Mandarin fluency and Jane Austen expertise in her teens (see you guys? I’m so smart and special! AND nobody likes me either just like Mark Zuckerberg and Jobs!). Anyone opposing her had an ax to grind and was bitter and jealous and stupid (according to her and her family). Her family are complicit in encouraging her unicornism and never questioning her fantasy, lies, or resume-puffing on a global scale. Likewise, the government “BoardWhores” (great term) never read the fine print, asked hard questions, or did any checks on her or her claims. All taken at face value due to her parents connections in govt (and her Mom being a clerk for a Congess Cmte). Theranos did a few things right: the proved style and flash and hype are more important than facts, truth, data, and reality. Holmes brought in the big gun PR, Media Relations team that wrote entire stories which the media swallowed whole. Holmes got a legal dream team headed by David Boies (of Clinton-Gore fame) and Boies Hollywood-NYC pals to go along. Sadly, Holmes MAY have grown up to be a mature, real, honest, and true contributor to some science/health fields or research. Instead, her immature, socially-stunted, egotistical arrested development and lust for fame/wealth will list her alongside Jayson Blair, Bernie Madoff, Pitbull, True Detective Season 2, and Subprime Mortgage Vultures on the list of modern frauds and self-righteous cons. There’s a reason people like Rockefeller, Curie, Ford, Lister, Nikola Tesla, Pasteur, Carver, Jobs, Goddard, Gates, Carnegie, and Turing all worked so long and hard for success: it doesn’t come easy, fast, or cheap. But instead of idolizing real heroes who worked for it? Holmes idolizes Mark Zuckerberg (who only created a modern model of the old gossip-fueled party-line phone system). Even Steve Jobs knew enough to know he was a macro-visionary and marketeer, not Ghandi, Buddha or Issac Newton. Holmes is like so many from the dot-com bubble cult (Webvan and eToys and the Segway were gonna change mankind right?), when irrational exuberance (aka BULLSHIT) was mistaken for fact, truth, and hard work. Egged on by a clueless huckster like Balwani and a complicit media we can see the Empress clearly has no clothes. Just because they use every hipster trendy buzzword does not make them sage geniuses (see how many interviews she used “disrupter” and “lean in”). It just makes them the American Idols of biotech “startups”. With a little luck the government will shut them down, lock them out, and even David Boies will run scared in the face of billion-dollar lawsuits.

May 7, 2016 at 7:58 pm

Melayna Lokosky

Wow, you have great insight into Holmes and yes she clearly follows the other venture capital funded startup frauds often highlighted on this site. #GodsOfFrauds The VCs you were researching for should be grateful for diligence and ability to dig beyond the smoke and mirrors (image vs substance) sparing them not only the humiliation but loss of billions. Part of the problem is that VCs don’t care about the law, they care about their ROI, at any cost including employees and long-term shareholders. It’s great to see CMS and SEC actively getting involved in helping to expose this fraud which would have cost us all eventually but instead may put a CEO in jail and cost the Theranos VCs billions for funding fraud. Thanks for taking the time to read and comment, it’s truly appreciated-Melayna